The allocation of 200,000 head of import permits for Q4 was a welcome relief for both importers and exporters but delay in allocating some of these imports from Q3 to Q4 has resulted in some very serious problems with supply from northern Australia during the monsoon season when stock availability is always at its lowest, logistics are at their most difficult and prices are usually in the order of 10+% above those for the rest of the year. This puts the pressure right back onto both exporters and importers who need to keep ships moving and feedlots busy producing fat cattle. The inevitable price rises in feeders delivered to Indonesia will be very difficult to pass on to consumers in the short term. There is already buyer resistance as demonstrated by very weak retail demand since the end of Lebaran. Despite the fact that importers have dropped their fat steer price close to the Rp38,000 range requested by the Minister, the retail prices have stayed at roughly the same price as they were at the end of Ramadan. With consumers having had their annual spend up at Ramadan/Lebaran then saving their money for a purchase for Qurban (24th September) it appears that the demand for fresh beef has hit a solid wall of resistance. The fact that the retail end of the trade has failed to pass on the reduced prices presented by the feedlots is probably having an affect. While the importers reduced their prices to comply with the Minister’s wishes, the vast number of small retailers are under no such obligation and are too numerous to be singled out by the Minister.

While it is not strongly reported in the press, the talk amongst business people is that the economy is in poor shape and getting worse not better. Large numbers of jobs have been lost especially in the highly paid resource sector just like Australia and this is believed to be already exerting an affect on discretionary spending which certainly includes beef.

It is noteworthy that BULOG who were unable to import anywhere near its last permit allocation of 50,000 did not receive any additional permits for Q4.

If exporters can’t make a sale because the importer can’t afford the stock then the cost of demurrage to hold the ship (mostly on long term charter) without activity represents a very large loss providing a fascinating negotiating position in which the importer and the exporter must do a deal in which both will probably lose some money in order to avoid much more serious losses for both if the trade stops all together. Once again, this represents a rare win for producers who have traditionally been the ones who have had to drop their price in the past to facilitate the continuation of the trade. With plenty of alternative market options, producers will no longer be the perpetual loser when this sporadic market log jam occurs now and into the foreseeable future. This represents another very significant milestone for the Australian industry.

During September, 32 Indonesian importers were required to attend court in Jakarta to defend allegations of price fixing by the Indonesian government agency KPPU (Supervisory Commission on Business Competition). The accusation is that importers fixed artificially high prices through rationing of supply of fat cattle into the market. The case is still being heard but importers appear to be relaxed about the allegations as their feedlots have been relatively empty due to a shortage of import permits and they are also subject to a law that requires them to hold all imported feeder cattle for a minimum of 120 days before selling for slaughter. Some have suggested that the simple forces of supply and demand are responsible for high prices rather than any mischievous actions by a cartel of feedlotters.

With fat steer prices ranging from the Minister’s Rp38,000 to up to Rp40,000 in Medan, I have chosen to use Rp39,000 for this month while the Rupiah has weekend a little against the AUD from Rp10,000 last month to an average of about 10,200 for September.

Toward the end of September the Director General of Livestock Services, Pak Mulando Bashar, announced that the allocation of feeder cattle import permits would be on an annual basis for 2016. This represents a major step forward for the trade and will go a long way to flattening out the peaks and troughs in the market. The details of how this will be implemented are yet to be revealed with the fine print being extremely important.

The festival of Qurban was celebrated on the 24th of September. During this celebration, Muslims who can afford it, donate male cattle, sheep or goats to the local mosque for distribution of meat to the poor. Poor people can make an application to the mosque which then allocates quantities of meat (usually 1kg packs) to worthy recipients. Prices this year appeared to be similar to last year although it is difficult to determine the real figure as animals are sold by head rather than by weight. There is a suggestion that the weights of animals has been reducing over the years as the supply of stock, especially local male cattle, declines. Last month I spent the lead up to Qurban around Balikpapan and Samarinda in Eastern Kalimantan. This region is a resource rich part of Indonesia with relatively high incomes. The numbers of bulls (almost all Bali cattle) on display all around the cities was huge. I personally visited one site where there were over 1,000 bulls being prepared for the festival. Elsewhere, there were groups of 50 to 400 animals tethered on the side of the roads on the outskirts of both cities. One local who is familiar with the supply of stock to the festivals suggested that the total number of bulls slaughtered for both cities could be in the order of 5,000 or more. With this activity taking place over the whole of Indonesia, the numbers of male cattle killed on one day has estimates from as low as 150,000 to as high as 1 million head. The reality is probably somewhere in the middle but the fact is that with a domestic herd of say 10 million head and a single day kill of say 3 to 400,000 bulls means that for the rest of the year the majority of animals available for slaughter are breeding females. Prices this year were averaging about Rp17 million per head with an average guess weight of about 300 kg translating to a per kg price of between Rp50 and Rp60,000 or AUD $4.90 to $5.88 per kg live weight. Many Indonesian cattle producers save all their male cattle for sale on this single day every year as a means of maximising their returns.

Hundreds of Bali bulls being advertised for sale on the side of the road in Kalimantan.

Bali bulls being fed up for Qurban. Average age about 2-3 years, average weight about 300kg.

Vietnam : Slaughter Steers AUD $4.34 / kg (VND15,900 to $1AUD)

Prices are steady in local currency terms with the increase in the AUD figure this month purely a result of the weakening of the AUD against the Dong.

The evolution of the Vietnamese beef market continues with imports slowing as the industry reacts to their constantly changing market environment. Lower returns have reduced demand from Australia while the focus is slowly shifting from simple trading of fat cattle to the development of efficient feedlotting systems. In addition, importers recognise the importance of local production and are increasing their intake of breeding cattle to commence the regeneration of the domestic beef herd.

The savage discounting seen in August appears to have stopped with local prices in the north holding at around VND 71,000 while prices in the south are steady in the 68-69,000 range.

The Australian producers are once again very lucky that at the time when Vietnam demand is backing off, Indonesia has announced a massive jump in import permit numbers.

The Vietnamese government and importers are well advanced with their negotiations with Brazil for the importation of live cattle. Brazil has relatively low cattle prices, a weak currency and large ships providing a serious alternative to Australian live exports where supplies are declining and prices continue to leap to record levels. All countries in continental South East Asia are sporadically infected with Foot and Mouth Disease and all have some level of FMD vaccination programs. Importation of Brazilian cattle from zones where the disease is “Free with vaccination” is a pretty safe bet for the importing country as these cattle are essentially the same status as the local SE Asian herd. The fact that Brazilian cattle are unrestricted by ESCAS requirements will make them doubly attractive to all of our customers in S.E. Asia. ESCAS is an expensive impost for importers who would happily pay 10 to 20% higher prices for live imports with unrestricted access to the entire regional market. My sources suggest that the first imports from Brazil could be delivered to Vietnam within the next 6 months.

Thailand : Slaughter Steers AUD $3.92 / kg (Baht 25.5 to $1AUD)

The Thai cattle market remains reasonably steady with the price decline in AUD terms this month solely due to the weakening of the Baht against the AUD. Wet weather continues to hamper feedlotters in the southern parts of the country. The Mekong river trade is having difficulties again due to additional restrictions (read grey route fees) to complete the movement of cattle from the Myanmar side of the border across the last few kilometres into China. It’s not clear if this is associated with the rebel fighting on the border or the general tightening of Chinese borders to grey route imports. Live cattle continue to flow into Thailand from Myanmar and out via Laos and Cambodia. Sources advise that some Thai cattle are still able enter China via Laos. The flow into Vietnam via Laos and Cambodia remains quite strong and will become even more attractive as the price of Australian deliveries continues to increase.

The possibility of live imports from Brazil continues to be investigated but is still a long way off. Australian cattle prices are probably too high to be attractive to Thai feeders and traders at the moment so profitable shipments to Thailand over the Australian wet season will be extremely difficult.

Malaysia : Slaughter Steers AUD $3.47 per / kg (RM3.05 to $1 AUD)

The Malaysian Ringgit has devalued further against the AUD again during the month of September. Local pricing is relatively constant with currency movements responsible for AUD price rise. The only real price movement noted for the month is a small increase in the supermarket price which is for Australian imported product. Customer expenditures on the Qurban festival would also have helped to keep demand steady at the wet and super markets.

The Philippines markets are relatively steady while the economy continues to be upbeat. Recent rice and corn harvests have been excellent with plentiful supplies of reasonably priced fruit, vegetables and fish. Employment is positive with lots of construction providing additional jobs. Retailers report that customers have cash to spend. The Peso has continued to firm a little against the AUD – Peso 33.0 to AUD$1

China : Slaughter Cattle AUD $5.11 / kg (RMB 4.5 = AUD$1)

The China beef and cattle business seems to be reflecting the mood in the rest of this massive economy – coming down off an extreme high and not sure where to bottom out. Import demand is easing for box beef and live cattle for both legal and grey channel supply routes. Live cattle prices remain well below their highs of 12 months ago although like most other markets around the world, this reduction in the live prices has not translated to lower retail prices. This is the same across Asia and matches what used to happen in Australia when live cattle prices dived but retail levels stayed firm. This month there has been a small rebound with slaughter cattle prices in Shanghai rising from 16Y in August to 17Y in September while Beijing prices moved up from 21Y during August to 23Yuan per kg live weight towards the end of September. Perhaps this is a signal that the bottom has been reached. Or is it a “dead cat bounce”? The only thing for certain is that nobody knows really knows.

China has serious problems with the credibility of its food safety systems. The recent crackdown on smuggled product resulted in official government announcements that 100,000 tons of smuggled “and out of date” meat had been seized across 14 provinces. This sort of publicity certainly doesn’t help consumer confidence which is already very low for local producers and suppliers.

Brunei : Always expensive, 100% Imported.

Angus Adnam provided these photos with prices from his recent visit to Brunei.

The Brunei dollar is linked to the Singapore dollar so the rate is almost parity with the AUD at the moment. Bruneians can afford to buy anything they want regardless of the cost but they still have a strong demand for frozen Indian buffalo meat. Probably because this was the most common “beef” eaten by the population for generations before oil and gas made them all rich.

The general weakening in live cattle demand from China and Vietnam has translated into reduced sales in Laos where annual live export numbers of locally bred stock are very small, probably less than 20 to 30,000 head per year. The majority of animals are traded into Vietnam where they are in most cases onsold to China. There is also a limited trade directly across the Lao border into China.

Demand is slowing for Lao live cattle exports to Thailand, Vietnam and China Photo from the Vientiane Times.

The figures below are converted to AUD$ from their respective currencies which are changing every day, so the actual prices here are corrupted slightly by constant foreign exchange fluctuations. The AUD$ figures presented below should be regarded as reliable trends rather than exact individual prices. Where possible the meat cut used for pricing in the wet and supermarket is Knuckle / Round.